Avon to float off energy arm

AVON Resources is to spinoff its energy arm Avon Energy into a new body to be called Liquefied Natural Gas.

The energy arm will be restructured and an initial public offering and a stock market float are due to follow in the not too distant future.

Its existing interest in the company will be converted into 8.75 million shares, being about 8 cents per share based on Avon’s expenditure to January 31.

Avon has made the step to free up its capital to pursue the development of its existing mineral assets and to possibly acquire further assets.

It is currently assessing several opportunities.

LNG has also secured interim external equity funding for the development of its business. The company has technology that allows it to develop LNG plants to link population centres with "trapped" or "flared" gas reservoirs.

It has used this technology to secure memorandums of understanding with London Stock Exchange-listed Aminex to use Aminex’s natural gas discoveries on the east coast of Africa for the production of LNG.

The company has also executed an MOU with the participants of EP104 that contains the Point Torment gas field near Derby in Western Australia.

Under that MOU, the company has the exclusive right to acquire Point Torment gas at $2.70 a gigajoule, subject to the proven gas reserves exceeding 35 billion cubic feet.

It is seeking to set up a liquid natural gas plant in Derby and market LNG into the Kimberley and West Kimberley regions as an alternative to diesel.

An appraisal well at Point Torment is planned for June 2004.

Avon attempted to apply its technology to the West Kimberley Power Procurement process.

It was unsuccessful in that bid, losing out ultimately to Queensland-based listed company Energy Development Limited.

That project was to involve the development of five new gas-fired power stations to supply electricity to Broome, Derby, Fitzroy Crossing, Halls Creek and Camballin-Looma for the next 20 years, a power purchase agreement worth up to $600 million.

That unsuccessful bid led to some rancour between Avon and the Western Australian Government.

Avon Resources company secretary Mark Bolton said Energy Development Limited had been allowed to drop their price considerably to match its bid.

"How did they find out that they should reduce their price by 13 per cent to bring it closer to ours?" Mr Bolton asked.

However, a Western Power spokes-man said at the time that there had been nothing untoward in the bidding process and that EDL had won the contract fairly.

Mr Bolton said that Avon had declined to pursue the matter further and had sought release from its reserve preferred bidder status.

Western Power advised the company that it has been released from that status.

Mr Bolton said one of the positives for the company from the West Kimberley power procurement process had been that EDL had opted to use similar technology to obtain the gas to fire its power stations.

“How did they find out that they should reduce their price by 13 per cent to bring it closer to ours.”

-         Mark Bolton